Real estate is generally deemed to be a safe investment in that the relative price volatility in this sector is typically less in comparison to the stock market. Historically, data indicates that property prices trend upwards when economic conditions are expected. Major crises—including the current pandemic—or significant periods of recession can prompt a temporary drop in prices. These downward trends can offer a substantial opportunity for first-time home buyers and those looking to enter the real estate investment space.
The general area and specific location are the determinative factors that influence whether a given property is considered hot or not. The targeted property type is also an important aspect of residential, commercial, industrial, or undeveloped land. Additional property characteristics to consider are connectivity (i.e., water/sewer, electricity, utilities, etc.), interest rates, economic conditions, and the current demand and supply in the real estate marketplace. There are also multiple options available to aspiring real estate investors in terms of how they want to go about managing their portfolios; whether that be assuming the role of landlord and enjoying the passive revenue stream from rental income, investing in a real estate investment trust (REIT) or attempting to fix and flip, and sell a property.
Using Hard Money Loans to Diversify Your Investment Portfolio
No matter whether you go with the REIT, landlord, or property fix and flipping strategy, you can leverage the distinct advantages of hard money loans in new york to expand and diversify your investment portfolio, which will subsequently enhance your bottom line.
Hard money is essentially unconditional financing for getting your real estate transaction fully funded without having to go through the qualification process associated with traditional financing routes. These traditional loan procedures can take a significant amount of time—a commodity often in short supply for real estate investors looking to capitalize on last-minute property purchases at premium price points.
The eligibility consideration for hard money lenders is focused on the merits and potential profitability of the deal at hand and not the borrower’s personal financial profile in the majority of situations. Investors should keep in mind the associated costs of obtaining a loan and how it will ultimately impact your return on investment. There are a few fees associated with hard money loans to be aware of, including:
- Interest: Hard money loans are interest-only loans that usually range between 8-12% depending on the loan amount and the specifics of the transaction is funded.
- Points: Lenders will usually charge points for availing the loan, with one point equating to 1% of the total loan amount.
- Extension Fees: These are charged in instances where the duration of the loan is extended, however, when partnering with Express Capital Financing, you will receive a free extension.
- Other Fees: These include costs related to inspections, processing, applications, etc.
Real estate investors should shop around and compare multiple hard money lenders to find the right fit for them in terms of cost and the ability to tailor a loan package that corresponds with your investment strategy.
The vast majority of hard money lenders are willing to lend up to 70%, which is a loan to value (LTV) of after repair value (ARV) for property flipping projects. For other types of projects, loan to construction (LTC) packages can range from 80-90%, which encompasses the acquisition expense and repair costs. This means that you can flip a property with minimal (10-15% of the project value) out-of-pocket expenses, which gives you ample opportunity to take on multiple projects using hard money loans and vastly expand your real estate investment portfolio. The more projects and properties you are drawing income from, the more your overall profit margin will increase.
If you are looking to partner with a hard money lender, reach out to Express Capital Financing today. We offer competitive rates and have over 30+ years in the industry.